European car makers must consolidate to be profitable in the long term, GM chairman Rick Wagoner told Automotive News Europe.
Too many car makers are splitting the European new car market to achieve sustainable critical mass, he said.
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“You cannot have six or seven manufacturers each with 8 to 10% of the market and make money,” Wagoner said. “I suspect that will change.”
Europe’s combination of several smaller mainstream car makers, a virtually flat market, and market fragmentation forces car makers to spread their resources too thin, he suggested.
Instead of focusing on a limited number of platforms and achieving economies of scale to boost profit margins, European manufacturers are adding new platforms, deriving more models per platform and developing multiple powertrain families, he said.
“We’re all spending more to do more models,” Wagoner said.
The added cost of developing and manufacturing so many variations without a “critical mass” of market share makes it virtually impossible for European car makers to generate consistent, healthy profits, he said.
GM is one of three major European car makers that have been unprofitable in recent years. The other two are Ford and Fiat Auto.
Wagoner defined a desirable critical mass as 15 to 20% of the European market with a model range based on four platforms on a six-year product cycle.
If not, car makers cannot sustain consistent profitability.
